Questions
In Shavertown, Pennsylvania, the owner of Wilkes-Barre Bookkeeping LLC was indicted for embezzling over $375,000 of...

In Shavertown, Pennsylvania, the owner of Wilkes-Barre Bookkeeping LLC was indicted for embezzling over $375,000 of his clients’ payroll tax remittances between 2010 and 2016 and for lying to clients about his actions. Additionally, he embezzled nearly $70,000 from a nonprofit for which he was the treasurer. He was sentenced to 38 months in prison and ordered to pay restitution totaling nearly $500,000.

  • Do you think this was a fair sentence? Why or why not?

In: Accounting

Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of...

Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2017
Assets
Cash $ 80,000
Accounts receivable 364,000
Raw materials inventory 96,000
Finished goods inventory 364,800
Total current assets 904,800
Equipment, gross 610,000
Accumulated depreciation (155,000 )
Equipment, net 455,000
Total assets $ 1,359,800
Liabilities and Equity
Accounts payable $ 195,500
Short-term notes payable 17,000
Total current liabilities 212,500
Long-term note payable 510,000
Total liabilities 722,500
Common stock 340,000
Retained earnings 297,300
Total stockholders’ equity 637,300
Total liabilities and equity $ 1,359,800


To prepare a master budget for April, May, and June of 2017, management gathers the following information:

  1. Sales for March total 20,000 units. Forecasted sales in units are as follows: April, 20,000; May, 19,000; June, 19,500; and July, 20,000. Sales of 245,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $22.80 per unit.
  2. Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,800 units, which complies with the policy. The expected June 30 ending raw materials inventory is 4,500 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
  3. Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s expected unit sales. The March 31 finished goods inventory is 16,000 units, which complies with the policy.
  4. Each finished unit requires 0.50 hours of direct labor at a rate of $20 per hour.
  5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.20 per direct labor hour. Depreciation of $23,400 per month is treated as fixed factory overhead.
  6. Sales representatives’ commissions are 6% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,500.
  7. Monthly general and administrative expenses include $17,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
  8. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
  9. All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.
  10. The minimum ending cash balance for all months is $45,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
  11. Dividends of $15,000 are to be declared and paid in May.
  12. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter.
  13. Equipment purchases of $135,000 are budgeted for the last day of June.


Required:
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. (Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.):

1. Sales budget.
2. Production budget.
3. Raw materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the entire second quarter (not for each month separately).
10. Budgeted balance sheet.

In: Accounting

Determination of whether a legal entity is a variable interest entity Assume a Legal Entity's capital...

Determination of whether a legal entity is a variable interest entity Assume a Legal Entity's capital structure consists of the following accounts: Short-term note payable $60,000 Long-term note payable 21,000 Mandatorily redeemable preferred stock 85,000 Common stock 30,000 Additional paid-in capital 60,000 Retained earnings 20,000 Total liabilities and equity $276,000 Note that FASB ASC 480 ("Distinguishing Liabilities from Equity") requires mandatorily redeemable preferred stock to be classified as a liability for financial reporting purposes. Unless otherwise indicated, each of the following parts of this question is independent: a. What is the maximum amount of expected losses that the Legal Entity can expect to sustain without being considered a variable interest entity (VIE)? $276,000 $131,000 $195,000 $110,000 b. What is the maximum amount of expected losses that the Legal Entity can expect to sustain if the lender of the long term note payable is the sole shareholder of the Legal Entity? $131,000 $276,000 $110,000 $195,000 c. What is the maximum amount of expected losses that the Legal Entity can expect to sustain if the long term note payable is convertible to common equity at the option of the holder of the note? Why? (Note that FASB ASC 470-20 ("Debt with Conversion and Other Features") requires convertible debt to be classified as a liability for financial reporting purposes.) $110,000 $195,000 $131,000 $276,000

In: Accounting

[The following information applies to the questions displayed below.] The following summary data for the payroll...

[The following information applies to the questions displayed below.]

The following summary data for the payroll period ended December 27, 2015, are available for Cayman Coating Co.:

   

Gross pay $ 172,000
FICA tax withholdings ?
Income tax withholdings 20,640
Group hospitalization insurance 2,540
Employee contributions to pension plan ?
Total deductions 41,650
Net pay ?

   

Additional information:

  • For employees, FICA tax rates for 2015 were 7.65% on the first $118,500 of each employee’s annual earnings. However, no employees had accumulated earnings for the year in excess of the $118,500 limit.
  • For employers, FICA tax rates for 2015 were also 7.65% on the first $118,500 of each employee’s annual earnings.
  • The federal and state unemployment compensation tax rates are 0.6% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee’s annual earnings. Only $18,000 of the gross pay amount for the December 27, 2015, pay period was owed to employees who were still under the annual limit.

In: Accounting

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been...

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

  

Sales (12,900 units × $30 per unit) $ 387,000
Variable expenses 193,500
Contribution margin 193,500
Fixed expenses 216,000
Net operating loss $ (22,500 )

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $81,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $32,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.50 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,400?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,800 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,800)?

In: Accounting

Please provide an example of computing and use manufacturing overhead allocations using hierarchical and activity-based costing...

Please provide an example of computing and use manufacturing overhead allocations using hierarchical and activity-based costing methods.

In: Accounting

Sales and A budget of estimated unit production.Production Budgets Sonic Inc. manufactures two models of speakers,...

  1. Sales and A budget of estimated unit production.Production Budgets

    Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget.

    Rumble Thunder
    Estimated inventory (units), June 1 278 69
    Desired inventory (units), June 30 320 60
    Expected sales volume (units):
    East Region 3,900 3,450
    West Region 5,250 4,550
    Unit sales price $110 $225

    a. Prepare a sales budget.

    Sonic Inc.
    Sales Budget
    For the Month Ending June 30



    Product and Area
    Unit
    Sales
    Volume
    Unit
    Selling
    Price
    Total
    Sales
    Model Rumble:
    East Region $ $
    West Region
    Total $
    Model Thunder:
    East Region $ $
    West Region
    Total $
    Total revenue from sales $

    Feedback

    b. Prepare a production budget.

    Sonic Inc.
    Production Budget
    For the Month Ending June 30
    Units Model Rumble Units Model Thunder
    Expected units to be sold
    • Less estimated inventory, June 1
    • Plus desired inventory, June 30
    Total units required
    • Less estimated inventory, June 1
    • Plus desired inventory, June 30
    Total units to be produced

In: Accounting

Chesterfield County had the following transactions. a. A budget is passed for all ongoing activities. Revenue...

Chesterfield County had the following transactions.

a. A budget is passed for all ongoing activities. Revenue is anticipated to be $940,750 with approved spending of $631,000 and operating transfers out of $248,000.

b. A contract is signed with a construction company to build a new central office building for the government at a cost of $6,300,000 . A budget for this project has previously been recorded.

c. Bonds are sold for $6,300,000 (face value) to finance construction of the new office building.

d. The new building is completed. An invoice for $6,300,000 is received and paid.

e. Previously unrestricted cash of $1,220,000 is set aside to begin paying the bonds issued in (c).

f. A portion of the bonds comes due and $1,220,000 is paid. Of this total, $150,000 represents interest. The interest had not been previously accrued.

g. Citizens' property tax levies are assessed. Total billing for this tax is $815,000. On this date, the assessment is a legally enforceable claim according to the laws of this state. The money to be received is designated for the current period and 90 percent is assumed to be collectible in this period with receipt of an additional 6 percent during subsequent periods but in time to be available to pay current period claims. The remainder is expected to be uncollectible.

h. Cash of $169,000 is received from a toll road. This money is restricted for highway maintenance.

i. The county received investments valued at $379,000 as a donation from a grateful citizen. Income from these investments must be used to beautify local parks.

Prepare the entries first for fund financial statements and then for government-wide financial statements.

In: Accounting

Explain the similarities and differences between financial and managerial accounting, and prepare, use and interpret a...

Explain the similarities and differences between financial and managerial accounting, and prepare, use and interpret a contribution margin income statement using cost, volume, profit and break-even techniques.

In: Accounting

Quasi-Reorganization The Hassani Corporation has the following balance sheet: Current assets $ 700,000 Current liabilities $...

Quasi-Reorganization
The Hassani Corporation has the following balance sheet:

Current assets $ 700,000 Current liabilities $ 600,000
Noncurrent assets 3,600,000 Long-term liabilities 2,950,000
Common stock ($10 par) 1,700,000
Retained earnings (950,000)
Total assets $4,300,000 Total liabilities and equity $4,300,000


Company profitability has been marginal, in part due to book values of noncurrent assets that do not adequately reflect the reduced earning power of the assets. To give its balance sheet a better basis for future profitability, the company decides to undertake a quasi-reorganization. Hassani writes down noncurrent assets to their fair value of $3,000,000 and replaces the current common stock with 100,000 shares of a new issue having a $1 par value.

Required

a. Prepare journal entries to record the quasi-reorganization.

General Journal
Description Debit Credit
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital
To write down assets to fair value.
Retained earningsCommon stock ($10 par)Noncurrent assetsAdditional paid-in capital
Common stock ($1 par)
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital
To restructure common stock equity.
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital
To eliminate deficit.


b. Prepare a balance sheet following the quasi-reorganization.

Hassani Corporation
Balance Sheet
Current assets $
Noncurrent assets
$
Current liabilities $
Long-term liabilities
Common stock ($1 par)
Additional paid-in capital
Retained earnings since (date)
$   

In: Accounting

Air North has the following balance as of today: Bond coupon rate=8%; coupon payment annual;                           

Air North has the following balance as of today:

Bond coupon rate=8%; coupon payment annual;                                          ($million)

Remaining term to maturity= 15 years and the

Face value of each bond =$1000)                                                                  10

Common stock:

-Shares outstanding (#5,000,000)                                                                  6

-Retained Earnings                                                                                         8

The yield to maturity of a new 15-year bond which is of similar risk as that of Air North's currently outstanding bond is 12%. Air North can issue this new bond at par of $1,000. Common stock can be issued to the existing shareholders at $18 per share which represents an 11.11% discount from the prevailing market price. Beta of the stock of the firm is 1.4 while the risk free rate and the expected rate of return on the market portfolio are 6% and 14% respectively. Earnings per share at the end of the year are anticipated to be $3. Air North's tax rate is 25%.

Find:

i)              The cost of capital to the firm

ii)            The cost of equity capital, taking into account three models of estimating cost of equity capital

iii)           The weight average cost of capital

In: Accounting

Q3- Abdulaziz company purchased a machine in 2013 for 50,000 that has a useful life of...

Q3- Abdulaziz company purchased a machine in 2013 for 50,000 that has a useful life of 5 years with a salvage value of 5,000

Calculate the depreciation expense, accumulated depreciation, book value throughout its useful life using:

1- Straight-line method.

2- Units of Production method if the machine produces 100,000 units.

Here is a table of units produced each year:

First

Second

Third

Fourth

Fifth

23,000

25,000

-

30,000

22,000

3- Double Declining balance method.

In: Accounting

Tax attributes are

Tax attributes are

In: Accounting

Standard Product Cost, Direct Materials Variance Condiments Company uses standards to control its materials costs. Assume...

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,700 pounds) has the following standards:

Standard Quantity Standard Price
Whole tomatoes 4,500 lbs. $ 0.53 per lb.
Vinegar 250 gal. $ 3.20 per gal.
Corn syrup 22 gal. $ 11.80 per gal.
Salt 100 lbs. $ 2.90 per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:

4,700 lbs. of tomatoes
240 gal. of vinegar
23 gal. of corn syrup
99 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

Ingredient Standard Cost per Batch
Whole tomatoes $
Vinegar $
Corn syrup $
Salt $
Total $
Standard unit materials cost per pound $

b.  Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient Materials Quantity Variance Favorable/Unfavorable
Whole tomatoes $
Vinegar $
Corn syrup $
Salt $
Total direct materials quantity variance $

In: Accounting

Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets The budget director of Gourmet Grill...

Sales, Production, Direct Materials Purchases, and Direct Labor Cost Budgets

The budget director of Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July is summarized as follows:

a. Estimated sales for July by sales territory:

Maine:
Backyard Chef 310 units at $700 per unit
Master Chef 150 units at $1,200 per unit
Vermont:
Backyard Chef 240 units at $750 per unit
Master Chef 110 units at $1,300 per unit
New Hampshire:
Backyard Chef 360 units at $750 per unit
Master Chef 180 units at $1,400 per unit

b. Estimated inventories at July 1:

Direct materials:
Grates 290 units
Stainless steel   1,500 lbs.  
Burner subassemblies 170 units
Shelves 340 units
Finished products:
Backyard Chef 30 units
Master Chef 32 units

c. Desired inventories at July 31:

Direct materials:
Grates 340 units
Stainless steel   1,800 lbs.  
Burner subassemblies 155 units
Shelves 315 units
Finished products:
Backyard Chef 40 units
Master Chef 22 units

d. Direct materials used in production:

In manufacture of Backyard Chef:
Grates 3 units per unit of product
Stainless steel 24 lbs. per unit of product
Burner subassemblies 2 units per unit of product
Shelves 4 units per unit of product
In manufacture of Master Chef:
Grates 6 units per unit of product
Stainless steel 42 lbs. per unit of product
Burner subassemblies 4 units per unit of product
Shelves 5 units per unit of product

e. Anticipated purchase price for direct materials:

Grates $15 per unit
Stainless steel   $6 per lb.  
Burner subassemblies $110 per unit
Shelves $10 per unit

f. Direct labor requirements:

Backyard Chef:
Stamping Department 0.50 hr. at $17 per hr.
Forming Department 0.60 hr. at $15 per hr.
Assembly Department 1.00 hr. at $14 per hr.
Master Chef:
Stamping Department 0.60 hr. at $17 per hr.
Forming Department 0.80 hr. at $15 per hr.
Assembly Department 1.50 hrs. at $14 per hr.

Required:

1. Prepare a sales budget for July.

Gourmet Grill Company
Sales Budget
For the Month Ending July 31
Product and Area Unit Sales
Volume
Unit Selling
Price
Total Sales
Backyard Chef:
Maine $ $
Vermont
New Hampshire
Total $
Master Chef:
Maine $ $
Vermont
New Hampshire
Total $
Total revenue from sales $

2. Prepare a production budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gourmet Grill Company
Production Budget
For the Month Ending July 31
Units
Backyard Chef Master Chef

3. Prepare a direct materials purchases budget for July. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gourmet Grill Company
Direct Materials Purchases Budget
For the Month Ending July 31
Grates
(units)
Stainless Steel
(lbs.)
Burner Sub-
assemblies
(units)
Shelves
(units)
Total
Required units for production:
Backyard Chef
Master Chef
Desired inventory, July 31
Total
Estimated inventory, July 1
Total units to be purchased
Unit price $ $ $ $
Total direct materials to be purchased $ $ $ $ $

4. Prepare a direct labor cost budget for July.

Gourmet Grill Company
Direct Labor Cost Budget
For the Month Ending July 31
Stamping
Department
Forming Department Assembly Department Total
Hours required for production:
Backyard Chef
Master Chef
Total
Hourly rate $ $ $
Total direct labor cost $ $ $ $

In: Accounting